Moody’s Ratings has affirmed the long-term and short-term foreign and local currency deposit ratings of Oversea-Chinese Banking Corp Ltd (OCBC) at Aa1/P-1, maintaining a stable outlook. The affirmation also includes OCBC’s senior unsecured debt and medium-term note programme ratings. This decision underscores Moody’s confidence in OCBC’s ability to sustain its solid fundamentals through 2025–2026, despite potential asset risks from exposure to trade-oriented companies and the property sector in Hong Kong.
Moody’s expects OCBC’s problem loans ratio to remain below 2% of gross loans, with a slight decline in its core capital ratio, which will still remain robust. Profitability is anticipated to decrease mildly, yet stay at a good level. The bank’s liquidity and funding are projected to remain very strong, with a continued reliance on deposit-led funding and a high buffer of liquid assets.
OCBC’s Common Equity Tier 1 (CET1) ratio was 15.5% at the end of March 2025, with expectations of a modest decrease to around 14% by 2026 due to higher capital distributions. The bank’s return on assets is predicted to decline to around 1.1% during this period, attributed to net interest margin compression from easing monetary policies in key markets. Despite this, OCBC’s non-net interest income, including contributions from its insurance subsidiary Great Eastern Holdings, is expected to remain robust.
The ratings reflect OCBC’s a1 baseline credit assessment and a three-notch uplift due to a very high probability of public support from the Singaporean government. Whilst an upgrade of OCBC’s ratings is unlikely, improvements in macroeconomic conditions could lead to an upgrade of its baseline credit assessment. Conversely, a downgrade could occur if the problem loans ratio exceeds 3% or if tangible common equity falls below 14%.
“`
